Lackland v. Renshaw

• Decision Date: 24 March 1914
• Parties: RUFUS J. LACKLAND et al., Trustees, Appellants, v. EDWIN and RAY RENSHAW and the AMERICAN SURETY COMPANY OF NEW YORK
• Court: Missouri Supreme Court

165 S.W. 314

256 Mo. 133

RUFUS J. LACKLAND et al., Trustees, Appellants, v. EDWIN and RAY RENSHAW and the AMERICAN SURETY COMPANY OF NEW YORK

Supreme Court of Missouri, Second Division

March 24, 1914

Appeal from St. Louis City Circuit Court. -- Hon. James E. Withrow Judge.

Reversed and remanded (with directions).

Judson & Green for appellants.

(1) The notices of the contractor's default given to the surety company by plaintiffs were a sufficient compliance with the terms of the bond. Grocery Co. v. Guaranty Co., 130 Mo.App. 431; Fidelity Co. v. Bank, 97 Ga. 634; Ins. Co. v. Surety Co., 93 Cal. 7; Bldg. Assn v. Gibbs, 119 Mich. 318; Surety Co. v. Pauley, 170 U.S. 133; Roark v. Trust Co., 130 Mo.App. 410; 1 Brandt on Suretyship (3 Ed.), sec. 16. (2) Under the undisputed evidence in this case the referee and the trial court erred in failing to find and hold that even if the plaintiffs did not comply with the strict letter of the bond in respect to giving notice of the contractor's default to the surety company, yet all such defects in said notices were waived by the said surety company for the following reasons: (a) The bond sued upon in this case, having been signed by a regularly incorporated surety company and having been issued on a printed form prepared by the surety company in consideration of a cash premium payment, is essentially a contract of insurance and must be construed as such. Brandt on Suretyships (1905 Ed.), sec. 5; 15 Am. & Eng. Ency. Law (2 Ed.), p. 1; Boppart v. Surety Co., 140 Mo.App. 683; Roark v. Ins. Co., 130 Mo.App. 407; 32 Cyc. 307; Shawman v. U.S. System Co., 92 Wis. 366; Bldg Assn. v. Obert, 169 Mo. 509; Surety Co. v. Pauley, 170 U.S. 133; People v. Rose, 174 Ill. 310; Davidson v. Kansas City, 133 S.W. 368; Cowles v. Fidelity Co., 72 P. 1032; Young v. Bonding Co., 228 Pa. 373; Land Co. v. Surety Co., 105 Minn. 213; Monro v. Surety Co., 92 P. 280; Surety Co. v. Scott, 18 Okla. 264; United States v. Fidelity Co., 178 F. 721; Peabody v. Realty Co., 126 N.Y.S. 349; State to use v. Turner, 101 Md. 584; Ice Co. v. Surety Co., 159 Mich. 102; United States v. Fidelity Co., 178 F. 692. (b) Failure to object promptly at the time these various notices were received was also a waiver of the right to object to the form of the notices or to their lack of verification or to their failure to contain a list of items with dates, even if the surety's pleadings had not waived it. McCullough v. Ins. Co., 113 Mo. 606; Boppart v. Surety Co., 140 Mo.App. 675; Roark v. Surety Co., 130 Mo.App. 401; Travis v. Ins. Co., 32 Mo.App. 198; Deland v. Ins. Co., 68 Mo.App. 277; Breckenridge v. Ins. Co., 87 Mo. 62; Ins. Co. v. Kyle, 11 Mo. 278; Sinn v. Ins. Co., 47 Mo. 54. (3) Under the decisions of this court it was not necessary for plaintiffs to plead such waiver in their reply to the surety company's answer, but they were entitled to show it under the plea of performance in their original petition. Andrews v. Ins. Co., 168 Mo. 151; Suess v. Ins. Co., 193 Mo. 564; Burgess v. Ins. Co., 114 Mo.App. 169, l. c. 190; Rudd v. Ins. Co., 120 Mo.App. 1. (4) The referee erred in holding that the contract sued upon required that alterations in the plans and specifications could only be made on the written order of the architects. That provision of the contract only applied to changes and alterations as to the cost of which the owners and the contractor could not agree. Furniture Co. v. Toll, 133 Mo.App. 407. The alterations in the plans and specifications in this case were all made according to the strict terms of the contract and it was not necessary to obtain the consent of the surety thereto. 6 Cyc. 83; Furniture Co. v. Toll, 133 Mo.App. 407; Howard Co. v. Baker, 119 Mo. 406. (5) The position before the court of a compensated and indemnified surety company which is in the business of executing such bonds for profit is radically different from that of the old fashioned accommodation surety. Cessante ratione legis, cessat ipsa lex. Brown Legal Maxims (160); Frost on Guaranty Ins., secs. 1, 2 and 4; 32 Cyc. 307 ,and cases cited; Bldg. Assn. v. Obert, 169 Mo. 519; Roark v. Trust Co., 130 Mo.App. 401; Gro. Co. v. Surety Co., 130 Mo.App. 430; Boppart v. Surety Co., 140 Mo.App. 675; Kansas City v. Davidson, 133 S.W. 365; Brandrup v. Brazier, 127 N.W. 424; Monroe v. Surety Co., 92 P. 280; Surety Co. v. Scott, 18 Okla. 264; United States v. Surety Co., 200 U.S. 197; Surety Co. v. Pauley, 170 U.S. 133; Fidelity-Guaranty Co. v. U.S., 191 U.S. 426; People v. Rose, 174 Ill. 310; Bank v. Fidelity Co., 128 N.C. 366; Land Co. v. Surety Co., 105 Minn. 213; Leghorn v. Neydell, 80 P. 833; Walker v. Holtzlaw, 35 S.E. 754; Tebbetts v. Guaranty Co., 73 F. 95; Van Buren Co. v. Surety Co., 115 N.W. 24; Ice Mfg. Co. v. Bonding Co., 115 Ky. 863; Philadelphia to use v. Fidelity Co., 80 A. 63; Young v. Bonding Co., 228 Pa. St. 376; United States v. Fidelity Co., 178 F. 721; Peabody v. Realty Co., 126 N.Y.S. 349; State to use v. Turner, 101 Md. 584; Ice Co. v. Surety Co., 159 Mich. 102; Rule v. Anderson, 142 S.W. 358. (a) The hired surety company is not released from liability on a building bond by pre-payments to the contractor, unless such pre-payments result in some loss or injury to the surety. Boppart v. Surety Co., 140 Mo.App. 683; Leghorn v. Nydell, 80 P. 833; Hand Mfg. Co. v. Marks, 36 Ore. 533; Bateman Bros. v. Surety Co., 145 Cal. 243; Philadelphia to use v. Fidelity Co., 80 A. 63; Surety Co. v. Scott, 18 Okla. 268; United States v. Fidelity Co., 178 F. 721; College v. Indemnity Co., 120 N.Y.S. 496. (b) The indemnified and compensated surety company is not released from liability on the bond by payments made to the contractor without the architects' certificate when it affirmatively appears, as it does here, that the surety company was not damaged thereby. Surety Co. v. Scott, 18 Okla. 268; Cowles v. Fidelity & Guaranty Co., 72 P. 1032; Smith v. Malleston, 148 N.Y. 241; Leghorn v. Nydell, 80 P. 833; Surety Co. v. Loan & Trust Co., 98 S.W. 387; Philadelphia v. Fidelity Co., 80 A. 63; Boppart v. Surety Co., 140 Mo.App. 675; College v. Indem. Co., 120 N.Y.S. 496. (6) The weight of authority is that the burden of proof is upon the compensated surety to show that it has been damaged or prejudiced by any variation from the strict terms of the contract or bond which it claims has operated to release it from liability. Philadelphia to use v. Fidelity Co., 80 A. 63; United States v. Fidelity Co., 178 F. 721; Guaranty Co. v. Brick Co., 191 U.S. 416; Cowles v. Fidelity Co., 72 P. 1032.

J. D. Johnson and Loomis C. Johnson for respondent Surety Company.

(1) The appellants are bound by the referee's "Findings and Conclusions of Facts" -- (a) Because in their abstract they accept the same as correct for the purpose of this appeal. (b) Because the abstract in the case is wholly inadequate to advise this court as to what was the evidence upon which the referee based his findings. Rule 13 of the Supreme Court Rules; Harding v. Bedoll, 202 Mo. 631; Hubbard v. Slavens, 218 Mo. 614. (c) The referee's findings of fact in an action at law, when approved by the trial court if supported by substantial evidence, are conclusive on the appellate court. Bader v. Mill Co., 134 Mo.App. 143; Reifschneider v. Beck, 148 Mo.App. 736. (2) The rule which operates to discharge an accommodation surety by reason of an alteration of the terms of a contract, without the knowledge or consent of the surety, applies as well to a compensated surety. Lonergan v. L. & F. Co., 101 Tex. 76; Taylor v. Jeter, 23 Mo. 244; Beers v. Wolf, 116 Mo. 184; Martin v. White, 128 Mo.App. 125. The only modification of the rule indulged in the case of a compensated surety is that the contract of suretyship in the event of ambiguity is to be construed against the surety. Kansas City v. Davidson, 133 S.W. 368. It is the settled law of this and other jurisdictions that there is no implied obligation on the part of a surety whether accommodation or for hire, that he has undertaken more or other than that expressed in his contract, and it is only to the extent, in the manner, and under the circumstances pointed out in his bond that he is bound. Bauer v. Cabanne, 105 Mo. 110; Nofsinger v. Hartnett, 84 Mo. 549; Reissons v. Whites, 128 Mo.App. 135; Beers v. Wolf, 116 Mo. 179; School Dist. v. Green, 134 Mo.App. 421; Higgins v. Harvester Co., 181 Mo. 300; Burnes Est. v. Fidelity Co., 96 Mo.App. 467; Bank v. U.S., 164 U.S. 237; Simonson v. Thori, 36 Minn. 439; U.S. v. Am. B. & T. Co., 32 C. C. A. 420; Backus v. Archer, 109 Mich. 666; Shelton v. Surety Co., 66 C. C. A. 94; Zeigler v. Hallahan, 131 F. 205; Garstairs v. Am. Bond. Co., 54 C. C. A. 89; Guaranty Co. v. S. B. & T. Co., 183 U.S. 421; Surety Co. v. Lang, 60 C C. A. 625; Rice v. Fidelity Co., 43 C. C. A. 275; Indemnity Co. v. Wood, 19 C. C. A. 264; Am. Cr. Ind. Co. v. Carrollton Co., 36 C. C. A. 671; Jeffries v. Ins. Co., 22 Wall. 54; Ins. Co. v. France, 91 U.S. 401; Stearns' Law of Suretyship, sec. 250; Dobbin v. Bradley, 17 Wend. 422; Knight Co. v. Castle, 87 N. E. (Ind.) 976. (3) He who commits the first substantial breach of a contract cannot maintain an action against the other contracting party for a subsequent failure on his part to perform. Surety Co. v. Lang, 60 C. C. A. 628; Sick v. Ins. Co., 79 Mo.App. 612; Corrabine v. Cox, 136 Mo.App. 376.

BLAIR, C. Roy, C., concurs.

OPINION

BLAIR, C. --

This controversy arises upon a surety bond given to secure plaintiffs against loss by reason of any failure of the defendant contractors to perform their contract to erect a building in St. Louis. The trial court gave judgment for the defendant surety company. The questions presented relate solely to the efficacy of certain facts to release the surety from its obligation. Respondent...